Permanent supportive housing (PSH) has proven to be one of the most effective interventions for addressing chronic homelessness in America. By combining deeply affordable housing with wraparound supportive services, PSH helps individuals facing significant barriers—mental illness, substance-use disorders, long-term disabilities—achieve and maintain housing stability.
The model works: Decades of research demonstrate that PSH reduces homelessness, decreases emergency service utilization, and improves health outcomes for some of our most vulnerable neighbors.
However, these projects often require more intricate underwriting than standard low-income housing tax credit (LIHTC) properties. To help investors better understand those unique considerations, the Affordable Housing Investors Council (AHIC) has published the industry’s first comprehensive PSH guidance.
The guidance is designed to replace uncertainty with information. Rather than prescribing rigid requirements, the document presents key considerations for investors to evaluate when assessing PSH opportunities.
It identifies the specific differences between PSH and traditional LIHTC projects, including target populations, unique coordination needs, resident services and funding, tenant referral processes and specialized staffing, security, and design requirements.
A Framework for Evaluation
The guidance provides detailed due diligence questions across critical areas: target populations, sponsor experience and capacity, property manager qualifications, service provider evaluation, services funding and contracts, tenant referral processes, rental subsidies, security, and regulatory considerations.
It includes underwriting recommendations at both the unit level and project level, covering vacancy allowances, lease-up timing, replacement reserves, operating expenses, and other factors that may warrant different assumptions in PSH transactions.
Seven appendices provide additional depth on topics, including underwriting the market for PSH, service funding loss considerations, sample regulatory relief language, and design considerations.
A Collaborative Effort
The AHIC PSH Guidance was developed by a task force of experienced underwriters and informed by extensive feedback from across the affordable housing ecosystem, including developers, syndicators, service providers, and state and local housing partners.
Their participation reflects a shared recognition that enhancing industry knowledge of PSH can increase investor confidence and lead to more capital flowing into a housing model that works.
Looking Ahead
The release of this guidance is a starting point, not an endpoint. As the PSH landscape evolves—and as homelessness policy and funding priorities continue to shift—we expect the guidance to evolve as well.
We encourage investors, developers, and service providers to engage with this framework, test it against their own experiences, and share feedback that can inform future updates.
One theme that emerged consistently in our discussions was the structural mismatch between the long-term nature of LIHTC investments and the shorter, less predictable cycles of services funding. While tax credit owners and investors commit capital to housing for decades, the funding that supports resident services is often awarded for limited terms with uncertain renewal.
For housing providers and investors whose primary focus is the long-term operation of decent, safe, and sanitary housing, this disconnect understandably introduces caution. The industry welcomes continued dialogue with policymakers and service funders on ways to better align the duration, reliability, and flexibility of services funding with the long-term commitments inherent in LIHTC investments.
Strengthening that alignment would reduce underwriting uncertainty and help broaden the pool of housing providers and capital willing to engage in PSH.
Permanent supportive housing represents the best of what public-private partnership can accomplish. With clearer frameworks for understanding these investments, we believe the industry can expand PSH production while maintaining the underwriting discipline that has made the LIHTC program successful for more than three decades.
The AHIC Permanent Supportive Housing Underwriting Guidance is available at www.ahic.org.
Vihar Sheth is board president of the Affordable Housing Investors Council, a national organization representing equity investors in the low-income housing tax credit program. An industry veteran, he is managing director of affordable housing at U.S. Bancorp Impact Finance.